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Aifa hits out at big FSA fines for small companies

Aifa has slammed the FSA for raising small firms’ enforcement penalties and says this would be unnecessary if the regulator was doing its job.

The FSA is proposing a new framework that will triple fines. It says as the likelihood of detecting breaches in small firms is relatively low compared with a larger, relationship-managed firm, the penalty must be high to achieve cre- dible deterrence.

Aifa director general Chris Cummings says: “The FSA is raising penalties because it cannot do its job properly and supervise firms adequately. It should take more care at the authorisation stage and not let people in that should not be there. Those it does let in should be supervised closely for six to nine months, then the regulator should use a system that rewards good behaviour.”

But FSA director of enforcement Margaret Cole says that the system of supervision for small firms is “valid and appropriate”. She says: “The model has to recognise that across the greater population there is an issue over discovery and detection of wrongdoing. I do not think you can translate that into not doing our job properly.

“Small firms benefit from our supervisory approach and we want to make sure that they do not take advantage of that by engaging in wrong-doing because they have a view that they are not going to be found out.”


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There are 14 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 9th July 2009 at 11:25 am

    Aifa hits out at big FSA fines for small companies
    FSA director of (after the event) enforcement Margaret Cole says that the system of supervision for small firms is “valid and appropriate”. In the opinion of the FSA, that is ~ others obviously disagree, but hey, we’re the FSA, so we don’t have to take account of what anyone else might think. Ms. Cole then goes on to say: “The model has to recognise that across the greater population there is an issue over discovery and detection of wrongdoing. I do not think you can translate that into not doing our job properly”. This, to me, sounds very much like an admission that the FSA is incapable of doing its job properly so, instead of taking measures to rectify this, they’ll just up the fines and increase the terror factor for those who may be tempted to transgress. More money coming in ~ and the FSA always wants more of that, by golly ~ without having to do anything much more for it. Great formula. IFA’s, on the other hand, are constantly being instructed by the FSA to do tons more in return for less and less money coming in. Funny old world, isn’t it, unless you happen to be lucky enough to work for one of the regulators.

  2. Clarification From FSA Officer Required
    Can somebody in a lofty position with AIFA please get a written verifyable definition from Margaret Cole as to what exactly is covered by her words “wrong doing”. Should be interesting if she merits the enquiry with a response.

  3. Aifa hits out at big FSA fines for small companies
    Can’t see what the fuss is about. If you don’t do anything wrong then the size of the penalty doesn’t matter. If you do something wrong then you have to pay a price and the larger the price the greater the incentive to do the right thing.

  4. Douglas Carroll 9th July 2009 at 11:41 am

    A Law Unto Itself
    The FSA should not be allowed to impose it’s own fines as and when it thinks fit so to do.

    Under Human Rights legislation fines should only be imposed after a proper legal process.

  5. FSA penalties
    What about those who are unregistered? Does the FSA wish to find them out and deal with them?

    Do the FSA focus on the real issues or are they content with monitoring paper trails.

    It is in all our interest to drive out the rogues and cheats and we need a channel of communication other then whistleblowing to achieve positive results

  6. Don’t do as I do, do as I say!
    Does Margaret Cole mean that if a small IFA / Mortgage Broker makes an error, they are going to be made an example of or does she mean someone who knowingly commits fraud will be severely fined? If it is the former, please can we have chapter & verse of the huge fines and examples made of FSA employees / regulators who made huge mistakes and fell asleep on the job causing the financial demise of our country and the failure of many banks, plus, the names of the corprate / bank employees – directors who were also personally fined etc. I thought the FSA mantra was ‘not to aportion blame (read bank / insurance company cronies and of course themselves) but to “learn from mistakes”. Is this another uneven, backhanded unfair treatment of IFA / Mortgage advisers? i.e. the advisers who have the least complaints and the least upheld complaints against them. FSA are still focusing too much on small intermediaries(and not enough on the banks / providers / lenders / insurers etc. Roll on the election when the FSA will find out that they have no friends with their anti-competitive leanings and teh Conservatives have said they will get rid of them!

  7. Aifa hits out at big FSA fines for small companies
    As ever, Julian has it spot on. Not sure who Grad 1 is but either they work for a b*nk or somewhere where errors never get spotted or complained about. What it is to be perfect!

  8. Don’t do as I do, do as I say!
    Ah! Now we get to the crux of the problem.
    Why have the FSA done more or less nothing in terms of fining, prosecuting or punishing the criminals, because that is what they are, who bankrupted our banks and thereby the nation.
    I am sure I am not the only one who would like to see Margaret Cole not only comment on that but actually take some action and earn the substantial remuneration she receives.

  9. Blame
    A year or so ago I had a long chat with Eddie George, god rest his soul when he told me how he had screamed like buggery when Tony and Gordon took the regulation of the banking system off him and giving it to a monolithic organisation in east London with no previous expereince of succesfully monitoring large financial organisations.They mucked that up and will continue to slowly destroy the rest of us. Got to go now, trying to get a job in banking or regulation or somewhere I can ignore common sense.

  10. Raus ! Raus ! Raus !
    I do believe that we are not far off the day when all the small brokers will be lined up agianst a wall and shot at dawn by the FSA. It would be cheaper for them and us. Come on Mr Cameron save us.

  11. Don’t do as I do, do as I say!
    I dn’t work in a bank and I certainly don’t profess to be perfect. However, hopefully this clarifies things for ‘Anonymous’, I do think the FSA do very little of a constructive or useful nature and the FSA should’ve dealt far more ruthlessly with the bank executives that got us into the current economic mess.

  12. Bigger fines for small companies
    The FSA are a bunch of clowns if they think this is a reasonable approach based upon small IFAS benefitting from a lower possibility of detection . Their reasoning actually highlights the hidden agenda within RDR. For years the FSA has tried to use the commission argument to get rid of IFAs. We are a thorn in their side – the FSA wants to do as little as possible (preferring to monitor a few banks and a couple of National IFA firms) and still pick up gloriously generous pay, pensions and benefit packages. Hopefully, the next government will get rid of the FSA and all these twits will have to find real jobs – I don’t hold out much hope for most of them being able to hold down a proper job.

  13. Reducing good quality advice
    The FSA is on record as saying that they will only be concerned about lack of competition when regulated firms number ‘less than six’.
    As other correspondents have already mentioned the FSA is trying to drastically reduce the number of IFA’s and Mortgage Brokers despite the fact that they have the lowest number of complaints and the lowest percentage of complaints upheld!
    Presumably the reasons are that they do not understand the nature of small business because they are all tick box bureaucrats, and imposing the type of systems they feel are needed would involve them in too much work. It would be interesting to see what results they would achieve if they had to earn a living being constructive.
    I echo the thoughts on probing the FSA for details of the individual fines on staff and directors at the large institutions that have been bankrupted by these people, together with details of those within the FSA who were incompetent and asleep on the job and what fines were imposed on them. Should all these people not be considered ‘improper persons’ to be employed in Finance or in Regulation? Excusing their actions by saying that they don’t want to play the ‘blame game’ is exactly that, an excuse, for letting them keep their positions and salaries.
    When it comes to small IFA’s and brokerages however ‘Blame’ is exactly what they are proposing. Of course this is because they are such easy targets and by making a loud noise about action in that area they hope to deflect attention from the areas where the most abuse takes place and where the ‘orderly operation of markets’ takes place.
    The FSA is obviously on a ‘Job Retention’ exercise hoping to have in place lots more regulations before the next election. The spin will then be “let these new regulations bed in for a bit (preferably a few years), if there are a few teething problems we can ‘fine tune things’, but don’t throw everything away just yet!”

    The sub-text is, we like our cushy little jobs here, with our high salaries, perks and no responsibility for anything. We just love writing the rules and interpreting those rules as we see fit. We love playing Judge, Jury, Prosecutor and ultimately the sole beneficiaries of all this (and big fines bolster our self esteem and are something to brag about down at the Champagne bar, no matter about the economy or the customers, not our responsibility), and if there are only half a dozen firms for them to go to they will all offer pretty much identical products, as the banks do now, so there will be little or no possibility to ‘miss-sell’. Ergo we will have the ‘consumer outcomes’ we all want!
    No competition? not our problem, we can’t help it if the small businesses could not survive, they just didn’t see it our way.
    All this has become even more urgent since George Osborne indicated he would return the regulation of banks to the B of E. I do sincerely hope he sticks to his guns on this.

  14. they dont really care about is
    Grad1 You are obviously young & naive “if you have not done anything wrong the size of the fine will not matter” roughly translated could read ” if you have done nothing wrong you have nothing to worry about” A cursory glance at history tells us this philosophy is complete nonsense. Since when did an IFA have to do anything wrong to have the FSA come down on them like a ton of bricks? The endowment complaints fiasco should be answer enough to that. The FSA obviously want to continue to appear big & powerful & threatening. The only way to appear so is to grab headlines with massive fines doled out to those who do not have the financial or otherwise werewithall to defend themselves. I expect we will see a number of these headlines fairly soon. That way the fsa can pat themselves on the back for a job well done & have the admiration of the consumers who are often unaware of these underhanded tactics in the way smaller companies are treated in comparison to larger organisations. At the same time a warning shot is sent out to the IFA sector that no matter how hard he tries he will never please this money guzzling god who is able to consume him at will. In the words of the regulatory boss “be afraid be very afraid” Now then who do you suppose this was directed at?.

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